How is the amount in the bonuses determined? In Investment Banking/Hedge Funds/Trading etc.
How does a company determine how much bonus a employee gets per year? Does it have to do with how much profit that individual contributed to the company during that year? Someone please explain to me how; lets say an analyst at Goldman Sachs makes 80k a year and then gets a bonus that is multiples of his base salary. Did this person contribute a profit worth $5 million dollars to get a $500k bonus?
If this is so, what is the industry's standard percentage ratio of employee's bonuses to the employee's profit contributions for each company? If you can, please provide real world examples.
I suggest you spend some time research this industry on WSO and M&I. No investment banking analyst will get a bonus equal to multiples of his base salary. Junior banker pay (analysts and associates) is roughly equal across the industry. As you move up the latter, the percentage of your all-in comp that is paid out as a discretionary bonus increases because you move from an analytical employee to one who brings revenue into the bank and are paid based on that.
What Sil said is right. If you're talking about BBs they are pretty much all in line and nowhere near multiples of their salary. However, there are some boutique banks out there that will bring in some young bankers if they really think they can bring in revenue for some reason. Usually they are working on commission though and it's an eat what you kill kind of deal.
At a macro level, looking across the entirety of a bank, some banks have a profit share model that they have pretty much agreed with shareholders, dividing profits between equity and employees. Often it's based on return on equity hurdles ie if the bank comes in above a ROE hurdle, the employees get a greater share of the profit earned in excess of the hurdle.
At an individual level, it's not formulaic at all. Nor is it in the interests of management to be transparent. It ends up being more a game about management of expectations, bluff, favouritism, incentivisation, staff retention, overt and implicit threats, occasional drama, hissy fits etc.
How do bonuses compare across groups at banks (specifically at the analyst/associate level) ? (Originally Posted: 02/03/2015)
I have friends going into S&T, IB, and commercial real estate at different bulge bracket banks. Everyone is offered the same starting analyst salary of 85k, but I'm curious just how different are bonuses? I would imagine that IB analysts earn a much larger bonus due to the extra hours they work.
Bump. Interested as well.
More specifically, is there is a disparity in bonuses between product groups and industry groups in IB? If all things were equal of course (same deal flow, region, etc).
This is like the oldest question ever asked. Seriously, it's the WSO version of "let there be light."
It depends on the group, the year and the bank (with all three being almost totally independent variables). So nobody here is going to be able to answer you.
Use the fucking search.
Why don't you post a link instead of acting like a pompous, inane douchebag?
Typically IBD > S&T > CRE. There are definitely exception the rules. You could be in a CRE group that kills it or in IBD group that only closes a few smaller deals.
How do the top of the foodchain guys get their bonus? (Originally Posted: 10/14/2011)
100% cash bonus or some cash some restricted stock(like IB's)? Just wondering.
http://www.candidcapital.com/node/45
[quote=aintnospam]http://www.candidcapital.com/node/45[/quote] that doesn't answer his fucking question.
to the OP: cash, if PE.
if it's at a BB, mix of cash and stock, although in the good old days it used to be cash.
Thank you.
Some PE firms pay their Partners 100% in base salary and don't have any bonus structure (outside of carried interest). I imagine it helps reduce bickering amongst management.
Question on carried interest for junior and mid-level people-is it paid out when the fund receives it (for example, if the fund has a deal-by-deal carry calculation and exits an investment for a big gain, do associates get a windfall?), or is it held back till year-end?
Also, it's not uncommon for upper-mid/lower-senior level people who work for PE or hedge funds to get compensated in part with partnership or LLC interests.
It's typically paid on a deal by deal basis. Whenever we exit a business, we get paid.. the calc is: (sale price - escrow amount - transaction fees - original investment equity - debt ) x 20% (i.e. firm carry pool) x your carry %. The good part that has the democrats in a tizzy is that we get capital gains tax of only 15% on the carry, so much better than your normal annual bonus.
I know for newer funds where they're not as established, the payout calculation is different to protect the LPs.. for example, assuming I run $100mm fund, 100% of proceeds from every exit would go towards paying back the $100mm... i.e. no one at the firm would get paid carry on exits until the LPs have all of their capital back. Once the capital is all paid back, then the calculation above would come into play, but without the subtraction of original investment equity.
Personally, I've seen it get paid out throughout the year (i.e. when the deal is closed, the money is in the bank, the checks are distributed.).
If it's a good year for the fund/funds though, you can probably expect to get a little something extra at year end on your bonus (obviously at the boss' discretion).
Thanks, that makes sense (especially at the principal/MD/partner level); the norm for less-senior people who get some small amount of carry is that you have both carry and a general year-end performance bonus, correct?
yep. the more senior guys (with bigger carry) will still get a bonus, but I've got to think it's probably a bit more normalized as they've already been paid through carry.
From my experience, whoever has carry in the fund also has a corresponding level of L.P. commitment to the fund. That means that as capital is called, you write a check. Similarly, when capital is returned, you collect a check. Same holds true for the carried interest.
It will all depend on where the fund(s) are in their life cycle. Obviously carry is the major component (and will often be the only form of non 'ordinary pay). If there are no previous funds in harvesting period - there will be no carry and so a 'normal' bonus may be paid....if the fund is harvesting investments then the partner will receive their portion of carry (either at a predetermined level i.e. 4bps) or may be discretionary based on Managing Partner / CEO / Chairman....also many funds will have vesting period under which a proportion of carry must be re-invested in the next Fund. It can get even more complicated - but no need to worry about that here!!!
Apologies to the non-current monkeys for some of the jargon, should all be googleable.
For the top guys that don't get a percentage of their PnL, who determines their discretionary bonus? Does that come from the Board of Directors? Or the C-Suite?
All the top guys get carry. That's the only reason people play in PE. As for the cash bonus part of their pay, typically determined by the general partners.
How do I-Banking bonuses work? Are they guaranteed? (Originally Posted: 09/19/2013)
I am a MBA student and I am considering breaking into banking. I would like to know how the pay packages work in I-Banking. Are the bonuses guaranteed or are they tied to how the bank performs, division performs and how the individual performs?
For example if a VP in Banking says he/she makes 400K a year is that with base pay + bonuses. Or is it base pay + bonuses + benefits? Or is it just base pay?
"considering breaking into banking." LOL, as if it's that simple.
that would be with base and bonus. no vp makes a 400k base. the range can vary based on a lot of factors.
Bonuses are based on all the above.
Post MBA sign on is something like 40k at a BB.
Haha, benefits wtf
Bonuses depend on your rating as an analyst.
He would be coming in as an Associate. Unless you are mistakenly referring to ER.
@Beny23 Clearly says he is interested in banking.
As @duffmt6 said, he would be a first year associate coming out of an MBA program, pay all in would be right around $200k which includes base salary plus a performance bonus.
Thanks. Does the performance bonus come in as a cash bonus or as stock options or RSUs etc vested over several years? Also, usually are bonuses more than 100% of base pay and are they usually given every year?
got a $100k guaranteed bonus when i walked in the door post-mba, but that's not the norm
i feel bad for whichever bank ends up hiring you.
Well if bonuses are guaranteed and not at all tied to performance then they won't be called bonuses anymore right? That is unless you are Nomura who hired all the Lehman Asia guys with promise of their Lehman level bonuses guaranteed for 3 years. Unsurprisingly, they all left once the the 3 year period was up.
@duffmt6 @yeahright I don't think it is certain that MBAs go directly to Associate. Particularly outside of the US, an MBA grad would often come in as an Analyst if they didn't have relevant experience. I would imagine that even if you are in the US and your MBA is not from one of the best schools, you shouldn't get rewarded with an automatic bump up to an Associate role.
Based on the original posting, I am guessing that he is not from one of the best MBA programs and does not have relevant experience.
How bonuses are set (Originally Posted: 08/29/2012)
Question for those in IB...the bank I work at pools its bonus pool and there's a standardized bonus for each bucket, regardless if your group killed it or flopped (read: socialism). Is this methodology consistent at other banks or are there some that give higher bonuses for groups that did better (same for the converse..groups that did worse).
Thanks.
how? politics
How what? How are bonuses set or how is it all pooled?
Bonus pool is some arbitrary % of revenues brought in. Buckets are based on overall performance by the aggregate groups with some benchmarking to overall industry.
For analysts and associates? Pretty sure that's similar to how it works in all banks. As an analyst/associate, you're pretty interchangeable with any other analyst/associate at your bank. Granted, sometimes there will be large disparities in competency, but in general, you aren't going to make it or break it for your group (i.e. if your group kills it, it's thanks to your rainmaker MD(s), and if your group has zero dealflow, that's not something you can really affect). Therefore, buckets are typically standardized across groups in IBD at the junior levels.
The same doesn't always hold true in trading, especially if you're at a prop shop. If you're killing it, then you can expect to be promoted faster and make more, precisely because YOU are the one bringing in the revenue.
Yep, standard across banks at the junior level
Pretty standard at the junior level. Might help you bump up into the next bucket but even that is unlikely.
You know how you spread comps to value companies? The same method is used to determine bonuses. Definitely would not want to have the BB's as my comps universe...
how much of i-banking bonuses are perfomance driven? (Originally Posted: 02/27/2007)
and how much are driven by company performance..IE..stock price..earnings, etc
The bank's performance will set the buckets. Your performance will determine which bucket you land in.
so, what kind of bonus would a bottom of the barrel first year associate expect at a BB?
c'mon, they must give some bonus even to the low performers along with some strong hint to look for another job
is this a serious question? banking isn't candy land if you suck they'll use you and drop you. I've seen guys get fired 1 day before their signing/relo package requirement is complete.
A bonus is still discretionary--if you absolutely suck, you could get zero, or close to it.
People who are so bad that they would get a zero bonus are let go long before they get to bonus time. Bonuses given to people who have no future are lower than the bottom tier and send a clear message that it's time to find another job.
What does it matter, I thought you were going to give up the banking gig because you couldn't work out every day, right?
wow..
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